8 S.E.2d 505 | S.C. | 1940
April 16, 1940.
The opinion of the Court was delivered by The appeal is from an order of the Circuit Court sustaining a demurrer interposed by the plaintiff to a counterclaim set up by the defendant in his answer.
The questions presented involve the construction and application of the provisions of Section 468, 1932 Code in relation to counterclaims. The trial Judge construed the complaint as stating a cause of action on contract, namely, a chattel mortgage, which was executed and delivered by the defendant to the plaintiff in January, 1937. He held that the counterclaim set up by the defendant stated a cause of action for damages ex delicto, and was not allowable, because it was based upon an independent, disconnected tort, not arising out of the contract or transaction alleged in the complaint as the foundation of the plaintiff's claim, or connected with the subject of the action. *341
It is set forth in the complaint that the defendant, on or about January 4, 1937, executed and delivered to the plaintiff a chattel mortgage of certain crops, to secure an indebtedness of $4,000.00; that although often requested to do so, defendant had not accounted for the crops covered by the mortgage, nor the proceeds of the sale thereof, except to the extent of approximately $3,100.00, leaving unaccounted for under the trust and fiduciary provisions of the contract the sum of approximately $800.00, and interest. The plaintiff further alleged, on information and belief, that the defendant had sold and disposed of the crops under mortgage, had converted the same to his own use, and had embezzled the property, or the proceeds of sale thereof, in fraud of plaintiff's rights.
The plaintiff prayed that defendant be required to account for the crops covered by the mortgage, or for the proceeds of the sale thereof; for judgment in the sum of $837.14 with interest, or for such amount as may be shown to be due it upon a proper accounting; for an order in arrest and bail, if any judgment against defendant should be returned unsatisfied; and for general relief, with costs.
By his answer, the defendant admitted the execution of the crop mortgage; admitted that he must account to the plaintiff, but denied that he was indebted to the plaintiff in any amount, or that he had disposed of the crops in violation of the mortgage.
By way of counterclaim, the defendant alleged that pending an accounting between him and the plaintiff, the latter threatened a criminal prosecution against him unless he should pay the balance claimed to be due; and that it accompanied the threats by other malicious and wrongful activities, in that it sought to destroy his business by slandering his credit. It is further charged that the plaintiff slandered the defendant by the use of these words in the presence of others: "If you don't pay this sum it is a criminal offense, *342 and you will be put in jail." Damages in the sum of $10,000.00 are claimed.
The major inquiry is whether or not the alleged counterclaim comes within the purview of the statute.
Section 468 of the Code provides:
"The counterclaim mentioned in the last section must be one existing in favor of a defendant, and against a plaintiff, between whom a several judgment might be had in the action, and arising out of one of the following causes of action.
"(1) A cause of action arising out of the contract or transaction set forth in the complaint as the foundation of the plaintiff's claim, or connected with the subject of the action.
"(2) In an action arising on contract, any other cause of action arising also on contract, and existing at the commencement of the action."
It will be observed from a reading of the foregoing section that three cases are provided for in which a counterclaim is permissible: First, in a case where the cause of action is set out in the counterclaim arises out of the contract or transaction set up in the complaint; second, a cause of action connected with the subject of the action; and, third, in an action arising on a contract, any other cause of action arising on contract, and existing at the commencement of the action. We are not here concerned with the third proposition which comes under subdivision (2) of the statute.
A cause of action based on tort may be set up as a counterclaim to an action based on contract, provided the statutory requirements of counterclaims are fulfilled. Columbia National Bank v. Rizer,
It is generally recognized that one of the primary purposes for adopting the Code system of pleading was to avoid, as far as possible, a multiplicity of suits, and to enable parties to determine their differences in *343 one action. The statute authorizing counterclaims, however, carries its own limitation. While the statute should be given a liberal construction, as is contended for by the appellant, it does not authorize a defendant to set up by way of counterclaim any and every cause of action he may have against a plaintiff. If the tort alleged in the defendant's counterclaim does not arise out of the contract alleged in the complaint, or out of the transaction (where a transaction, and not a contract, is set forth as the basis of the complaint), or is not connected with the subject of the action, it is an independent tort, and not the subject of a counterclaim.Columbia National Bank v. Rizer, supra.
In Columbia National Bank v. Rizer, supra, upon the decision in which the order appealed from is largely based, we quoted the following with approval from Meyer v. Quiggle,
Numerous other cases are cited and quoted from in the Rizer case, which we think settle the controversy here adversely to the contention of the appellant.
In addition to the authorities cited in Columbia NationalBank v. Rizer, a case very much in point is that of Pricev. Kobacker Furniture Company,
The North Carolina Supreme Court had the same question before it in the case of Weiner v. Equel's Style Shop,
In Milling Company v. Finlay, supra, the Court, speaking to the subject, said (
The case of Columbia National Bank v. Rizer, to which we have referred, was an action on contract upon notes which had been issued and delivered in March, 1927. In May, 1928, the plaintiff bank advertised for sale other notes which were collateral to the obligations sued upon, stating in the advertisement that Rizer had endorsed them, which *346 statement was untrue. When Rizer was sued upon the master obligation actually endorsed by him, he counterclaimed for damages on account of the said libel.
This Court held, among other things, that the counterclaim was not allowable, because, (a) the tort complained of was an independent tort, not connected with the subject of the action, the note sued on; (b) the tort sprang from the breach of a legal duty not attributable to anything contained in the contract sued on; and (c) the tort was not one which the parties could be supposed to have foreseen and contemplated in their mutual acts.
In the case at bar the cause of action for tort set up by the defendant is not the subject of a counterclaim under the statute, because it did not arise out of the "contract" nor out of the "transaction", which is a broader term than "contract." Nor can it be said that such tort action was connected with "the subject of the action".
The alleged tort is a slander, which if true constitutes a breach of a legal duty, but it is not attributable to anything contained in the contract sued upon. It is not a tort which the parties could be supposed to have foreseen and contemplated in their mutual acts. We said in Salley v. McCoy,
We have studied with much interest the able argument of the appellant, but after a review of the many authorities, both in and out of this State, we think the conclusion reached by the Circuit Judge was right.
Appellant likewise contends that two causes of action are set up in the complaint, one on contract and one in tort (conversion). We think this position is untenable.
Although there is a broad distinction between causes of action arising ex contractu and those arising exdelicto, the dividing line between breaches of contract *347
and torts often lies in the twilight zone, where it is difficult to determine whether the case applies strictly to the one or to the other. There is no certain test by which the Court can be guided in determining whether a particular action is ex delicto or ex contractu. V.P. Randolph Companyv. Walker,
In Shaw v. Great Atlantic Pacific Tea Company, supra, it was said: "Where a complaint states a cause of action in contract, and it appears that this is the gravamen of the action, it has been held that the nature of the action as excontractu is not affected or changed by the fact that there are also allegations in regard to tortious conduct on the part of the defendant, such as allegations in regard to negligence, or fraud, or conversion, which in such cases may be disregarded as surplusage. 1 C.J.S., Actions, Sec. 46, Pages 1100, 1101. Conversely it is true that an action may be regarded as one in tort where the allegations with reference to a contractual relation may be treated not as the gist of the action, but merely preliminary, and introductory to the statement of the tort action. St. Charles Mercantile Companyv. Armour Company,
The question must be determined solely from the pleadings, with an eye as to what is the real nature of the grievance. The plaintiff brought suit for an accounting on the contract, that is, the chattel mortgage, and the defendant concedes that a cause of action based on contract is set up in the complaint. He contends that a cause of action for conversion is also alleged, sounding in tort, and that such being the case the provision of Section 485 of the 1932 Code applies. This provision reads as follows: "In all actions sounding in tort the defendant shall have the right to plead a similar cause of action against the plaintiff by way *348 of counterclaim: Provided, That the cause of action of the plaintiff and defendant arise out of the same state of facts."
While it is true that an allegation as to conversion is incorporated in the complaint, we are of the opinion that the cause of action therein stated is essentially contractual. And even if it could be concluded that there is a doubt as to whether the action is one on contract or one in tort, the general rule is that the doubt must be resolved in favor of holding that the action is ex contractu. Shaw v. Great Atlantic Pacific Tea Company, supra; Lawson v. MetropolitanLife Insurance Company,
It follows, therefore, that Section 485 is not applicable, for the reason that the plaintiff's action is on contract and not in tort.
Appellant, in his brief, stresses the relevancy of the holding in International Vegetable Oil Company v. Townsend,
Judgment affirmed.
MR. CHIEF JUSTICE BONHAM and MESSRS. JUSTICES CARTER and J. HENRY JOHNSON and MR. ACTING ASSOCIATE JUSTICE E.H. HENDERSON concur. *349